Visicu files to raise IPO price

Baltimore firm's stock would open at $13-$15

A developer of remote monitoring systems for intensive care units yesterday filed to increase the price range of its initial stock offering - moving closer to becoming Baltimore's newest publicly traded company in an overall market with relatively few new stock offerings.

Visicu Inc. said it would price its offering between $13 and $15 a share. At the midpoint of that range, it said in a filing with federal securities regulators, Visicu would raise $76.4 million. The company would be selling up to 6.9 million new shares, which would represent a 20 percent stake in the company. At $14 a share, the whole company would be valued at about $435 million.

Visicu creates stations where doctors who specialize in intensive care can watch at once patients in several intensive care units often miles apart. Monitors designed by Visicu alert the doctor when vital signs change dramatically. The doctors can consult with nurses on the unit, or chat with the patients themselves, using microphones and video monitors.

Most of Visicu's clients use the system at night, when the units wouldn't ordinarily have a specialist, called an intensivist, on the premises. On-site specialists continue to work in the units during the day. A study sponsored by Visicu and published in a medical journal reported lower mortality rates in units where the system was used to provide an extra layer of oversight. The study also found lower costs, in large measure because patient stays were shorter, allowing the hospitals to generate more profit.

The company calls the electronic ICU center an "eICU." EICU will be the ticker symbol when the company's shares begin trading on the Nasdaq market.

The public sale of shares caps a period of rapid growth for the company. Founded by two Johns Hopkins intensive care specialists in 1998, the company had a single monitoring station overseeing 65 beds at the end of 2003. Two years later, it had 27 centers monitoring 2,250 intensive care beds in 97 hospitals.

Last month, when Visicu first set a price range for the offering, it said it expected to sell shares in the range of $11 to $13.

The higher price indicates that underwriters have been getting plenty of interest from potential investors, said David Menlow, president of IPOfinancial.com, a New Jersey company that does research on companies doing initial public offerings of stock.

"The market has been clamoring for supply" of IPOs, particularly for issues outside the energy sector, Menlow said.

Supply of IPOs has, in fact, been short. There were 56 IPOs for venture-backed companies such as Visicu in 2005, compared to 93 in 2004, according to the National Venture Capital Association. In Maryland, there were five IPOs last year, including the high-profile launch of Baltimore-based Under Armour Inc, according to Renaissance Capital, another company that tracks initial offerings. There has been one Maryland IPO this year, for Iomai Corp., a Gaithersburg vaccine company, according to Renaissance Capital.

Mark G. Heesen, president of the venture capital trade group, said fewer companies have been going public because "the acquisitions market is good, so there is another exit strategy" for investors looking to take profits. Also, he said, the Sarbanes-Oxley rules to bolster corporate accountability have discouraged going public by adding to the cost and regulatory burden, and investors have been wary of IPOs since the technology bust.

He said the Visicu offering was "a good sign," although the IPO market won't be taking off immediately because it takes several months to go through the stock registration process. There are only 25 venture-backed companies currently in registration, he said, about half the normal number.

Menlow said Visicu was able to attract interest at a slow time for IPOs because it has begun to be profitable after years of losses. "Financially, they've turned a corner quite dramatically," he said.

Also, he said, the medical technology sector is attractive, and the prestige of Morgan Stanley & Co. Inc., the lead underwriter, gave the offering visibility. Morgan Stanley has taken the lead for 16 IPOs in the past year, he said, and 15 are currently trading above the offering price, by an average of 57 percent.

In its filing with the Securities and Exchange Commission, Visicu said it would use the proceeds of the offering to expand its sales force, including possibly seeking international customers, and do more research and development. Eventually, the company said, it might modify its intensive care unit system for use elsewhere in the hospital, such as emergency rooms.

The offering will consist of 6 million new shares, plus an additional 900,000 if there is enough demand.

Sterling Partners, a Baltimore private equity firm, and Cardinal Health Partners, a New Jersey venture capital firm, will each own about 12 percent of the company after the share offering. The Abell Foundation of Baltimore, another investor, will own about 4 percent.